##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2010
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number: 000-24799
 THE CORPORATE EXECUTIVE BOARD COMPANY
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    52-2056410
(I.R.S. Employer
Identification Number)1919 North Lynn Street 
Arlington, Virginia
(Address of principal executive offices)
    
    22209
(Zip Code)
 (571) 303-3000
 Not applicable
 Yes þ No o
 Yes o No o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 Yes o No þ




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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
 INDEX TO FORM 10-Q
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets at March 31, 2010 (Unaudited) and December 31, 2009
    
    
    3Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. (Removed and Reserved)
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    19Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 THE CORPORATE EXECUTIVE BOARD COMPANY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    111,938
    
    
    $
    31,760Marketable securities
    
    
    5,995
    
    
    
    18,666Membership fees receivable, net
    
    
    80,771
    
    
    
    125,716Deferred income taxes, net
    
    
    7,793
    
    
    
    7,989Deferred incentive compensation
    
    
    12,396
    
    
    
    9,721Prepaid expenses and other current assets
    
    
    8,149
    
    
    
    9,584Total current assets
    
    
    227,042
    
    
    
    203,436Deferred income taxes, net
    
    
    39,870
    
    
    
    39,744Marketable securities
    
    
    25,527
    
    
    
    25,784Property and equipment, net
    
    
    86,029
    
    
    
    89,462Goodwill
    
    
    27,248
    
    
    
    27,129Intangible assets, net
    
    
    10,906
    
    
    
    12,246Other non-current assets
    
    
    25,547
    
    
    
    25,394Total assets
    
    $
    442,169
    
    
    $
    423,195Liabilities and stockholders equityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    35,133
    
    
    $
    48,764Accrued incentive compensation
    
    
    32,271
    
    
    
    27,975Deferred revenues
    
    
    240,267
    
    
    
    222,053Total current liabilities
    
    
    307,671
    
    
    
    298,792Deferred tax liabilities
    
    
    893
    
    
    
    867Other liabilities
    
    
    73,777
    
    
    
    73,259Total liabilities
    
    
    382,341
    
    
    
    372,918Stockholders equity:Common stock, par value $0.01; 100,000,000 shares
authorized, 43,336,770 and 43,313,597 shares
issued, and 34,163,374 and 34,147,008 shares
outstanding at March 31, 2010 and December 31,
2009, respectively
    
    
    433
    
    
    
    433Additional paid-in capital
    
    
    403,181
    
    
    
    401,629Retained earnings
    
    
    282,598
    
    
    
    274,718Accumulated elements of other comprehensive income
    
    
    1,483
    
    
    
    1,181Treasury stock, at cost, 9,173,396 and 9,166,589
shares at March 31, 2010 and December 31, 2009,
respectively
    
    
    (627,867
    )
    
    
    (627,684
    )Total stockholders equity
    
    
    59,828
    
    
    
    50,277Total liabilities and stockholders equity
    
    $
    442,169
    
    
    $
    423,195
   3




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THE CORPORATE EXECUTIVE BOARD COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except per share amounts)
 (Unaudited)
 Three months endedMarch 31,2010
    
    
    2009Revenues
    
    $
    100,175
    
    
    $
    117,440Costs and expenses:Cost of services
    
    
    33,512
    
    
    
    38,277Member relations and marketing
    
    
    25,780
    
    
    
    34,810General and administrative
    
    
    15,472
    
    
    
    15,736Depreciation and amortization
    
    
    5,135
    
    
    
    5,973Restructuring costs
    
    
    
    
    
    
    944Total costs and expenses
    
    
    79,899
    
    
    
    95,740Income from operations
    
    
    20,276
    
    
    
    21,700Other (expense) income, net
    
    
    (458
    )
    
    
    90Income before provision for income taxes
    
    
    19,818
    
    
    
    21,790Provision for income taxes
    
    
    8,185
    
    
    
    8,718Net income
    
    $
    11,633
    
    
    $
    13,072Earnings per share:Basic
    
    $
    0.34
    
    
    $
    0.38Diluted
    
    $
    0.34
    
    
    $
    0.38Dividends per share
    
    $
    0.11
    
    
    $
    0.44Weighted average shares used in the calculation of earnings per share:Basic
    
    
    34,155
    
    
    
    34,050Diluted
    
    
    34,429
    
    
    
    34,088
   4




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THE CORPORATE EXECUTIVE BOARD COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Three months endedMarch 31,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    11,633
    
    
    $
    13,072Adjustments to reconcile net income to net cash flows provided by operating activities:Depreciation and amortization
    
    
    5,135
    
    
    
    5,973Deferred income taxes
    
    
    213
    
    
    
    (965
    )Share-based compensation
    
    
    1,438
    
    
    
    3,868Amortization of marketable securities premiums, net
    
    
    134
    
    
    
    164Changes in operating assets and liabilities:Membership fees receivable, net
    
    
    44,945
    
    
    
    50,368Deferred incentive compensation
    
    
    (2,675
    )
    
    
    839Prepaid expenses and other current assets
    
    
    1,435
    
    
    
    (455
    )Other non-current assets
    
    
    (153
    )
    
    
    339Accounts payable and accrued liabilities
    
    
    (13,351
    )
    
    
    (21,930
    )Accrued incentive compensation
    
    
    4,296
    
    
    
    2,532Deferred revenues
    
    
    18,214
    
    
    
    (7,171
    )Other liabilities
    
    
    519
    
    
    
    (3,004
    )Net cash flows provided by operating activities
    
    
    71,783
    
    
    
    43,630Cash flows from investing activities:Purchases of property and equipment
    
    
    (283
    )
    
    
    (1,545
    )Acquisition of businesses
    
    
    
    
    
    
    (119
    )Maturities of marketable securities
    
    
    12,500
    
    
    
    12,805Net cash flows provided by investing activities
    
    
    12,217
    
    
    
    11,141Cash flows from financing activities:Proceeds from the issuance of common stock under the employee stock purchase plan
    
    
    114
    
    
    
    266Purchase of treasury shares
    
    
    (183
    )
    
    
    (41
    )Payment of dividends
    
    
    (3,753
    )
    
    
    (14,969
    )Net cash flows used in financing activities
    
    
    (3,822
    )
    
    
    (14,744
    )Net increase in cash and cash equivalents
    
    
    80,178
    
    
    
    40,027Cash and cash equivalents, beginning of period
    
    
    31,760
    
    
    
    16,214Cash and cash equivalents, end of period
    
    $
    111,938
    
    
    $
    56,241
   5




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THE CORPORATE EXECUTIVE BOARD COMPANY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1. Description of operations
  Note 2. Condensed consolidated financial statements
   Note 3. Recent accounting pronouncements
 Recently adopted
  Not yet adopted
    6




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Note 4. Fair value measurements
 Measurements
  
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
 
    
    Level 2  Observable inputs other than quoted prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets, quoted prices for
identical or similar assets and liabilities in markets that are not active, or other inputs
that are observable or can be corroborated by observable market data.
 
    
    Level 3  Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities. This includes certain
pricing models, discounted cash flow methodologies and similar techniques that use
significant unobservable inputs.
  March 31, 2010
    
    
    December 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Financial assetsCash and cash equivalents  demand deposits
    
    $
    111,938
    
    
    $
    
    
    
    $
    
    
    
    $
    31,760
    
    
    $
    
    
    
    $
    Available-for-sale marketable securities
    
    
    31,522
    
    
    
    
    
    
    
    
    
    
    
    44,450
    
    
    
    
    
    
    
    Variable insurance products held in a Rabbi Trust
    
    
    
    
    
    
    14,034
    
    
    
    
    
    
    
    
    
    
    
    13,612
    
    
    
    Forward currency exchange contracts
    
    
    
    
    
    
    120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Financial liabilitiesForward currency exchange contracts
    
    $
    
    
    
    $
    383
    
    
    $
    
    
    
    $
    
    
    
    $
    173
    
    
    $
    
  Note 5. Other liabilities
  March 31,
    
    
    December 31,2010
    
    
    2009Deferred compensation
    
    $
    8,696
    
    
    $
    9,890Lease incentives
    
    
    33,096
    
    
    
    33,588Deferred rent benefit  long term
    
    
    20,283
    
    
    
    19,459Other
    
    
    11,702
    
    
    
    10,322Total other liabilities
    
    $
    73,777
    
    
    $
    73,259
  7




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##### Table of Contents



Note 6. Stockholders equity and share-based compensation
 Share-based compensation
  Dividends
   Note 7. Derivative instruments and hedging activities
    Balance Sheet Location
    
    March 31, 2010
    
    
    December 31, 2009Asset DerivativesPrepaid expenses and other current assets
    
    $
    120
    
    
    $
    Liability DerivativesAccounts payable and accrued liabilities
    
    $
    383
    
    
    $
    173
  8




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Amount of Gain (Loss)

    
    
    Location of Loss Reclassified
    
    
    Amount of Gain (Loss) ReclassifiedRecognized in OCI on
    
    
    from Accumulated OCI into
    
    
    from Accumulated OCI into IncomeDerivative (Effective portion)

    
    
    Income (Effective portion)
    
    
    (Effective portion)2010

    


    2009
    
    
    
    
    
    
    2010
    
    
    2009$
(279
    )

    $
    68
    
    
    Cost of services
    
    $
    (174
    )
    
    $
    (593
    )Member relations and marketing
    
    
    (66
    )
    
    
    (537
    )General & Administrative
    
    
    (60
    )
    
    
    (248
    )$
    (300
    )
    
    $
    (1,378
    )
  Note 8. Restructuring costs
  Tower2008
    
    
    2009
    
    
    GroupPlan
    
    
    Plan
    
    
    PlanBalance at December 31, 2009
    
    $
    532
    
    
    $
    2,472
    
    
    $
    1,109Cash payments
    
    
    (395
    )
    
    
    (832
    )
    
    
    (1,010
    )Balance at March 31, 2010
    
    $
    137
    
    
    $
    1,640
    
    
    $
    99
  Note 9. Income taxes
   Note 10. Earnings per share
  Three months ended March 31,2010
    
    
    2009Basic weighted average common shares outstanding
    
    
    34,155
    
    
    
    34,050Effect of dilutive common shares outstanding
    
    
    274
    
    
    
    38Diluted weighted average common shares outstanding
    
    
    34,429
    
    
    
    34,088
  Note 11. Comprehensive income
  Three months ended March 31,2010
    
    
    2009Net income
    
    $
    11,633
    
    
    $
    13,072Change in unrealized gains, net of tax, for available-for-sale marketable securities
    
    
    (179
    )
    
    
    110Change in cumulative foreign currency translation gain
    
    
    505
    
    
    
    Change in unrealized loss, net of tax, for forward currency exchange contracts
    
    
    (167
    )
    
    
    762Total comprehensive income
    
    $
    11,792
    
    
    $
    13,944
  9




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Note 12. Commitments and contingencies
 Operating leases
    Total
    
    
    YE 2010
    
    
    YE 2011
    
    
    YE 2012
    
    
    YE 2013
    
    
    YE 2014
    
    
    ThereafterOperating lease obligations
    
    $
    620,116
    
    
    $
    25,652
    
    
    $
    34,760
    
    
    $
    34,393
    
    
    $
    34,248
    
    
    $
    33,944
    
    
    $
    457,119Sublease receipts
    
    
    (286,492
    )
    
    
    (6,932
    )
    
    
    (9,932
    )
    
    
    (13,883
    )
    
    
    (14,238
    )
    
    
    (13,383
    )
    
    
    (228,124
    )Total net lease obligations
    
    $
    333,624
    
    
    $
    18,720
    
    
    $
    24,828
    
    
    $
    20,510
    
    
    $
    20,010
    
    
    $
    20,561
    
    
    $
    228,995
 Other
   Note 13. Subsequent event
   10




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Executive Overview
      Non-GAAP Financial Measures
   11




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Three Months EndedMarch 31,2010
    
    
    2009Net income
    
    $
    11,633
    
    
    $
    13,072Interest income, net
    
    
    (436
    )
    
    
    (598
    )Depreciation and amortization
    
    
    5,135
    
    
    
    5,973Provision for income taxes
    
    
    8,185
    
    
    
    8,718EBITDA
    
    $
    24,517
    
    
    $
    27,165Restructuring costs
    
    
    
    
    
    
    944Adjusted EBITDA
    
    $
    24,517
    
    
    $
    28,109
 Three Months EndedMarch 31,2010
    
    
    2009Net income
    
    $
    11,633
    
    
    $
    13,072Adjustments, net of tax:Restructuring costs
    
    
    
    
    
    
    566Adjusted net income
    
    $
    11,633
    
    
    $
    13,638
 Three Months EndedMarch 31,2010
    
    
    2009GAAP diluted earnings per share
    
    $
    0.34
    
    
    $
    0.38Adjustments, net of tax:Restructuring costs
    
    
    
    
    
    
    0.02Non-GAAP diluted earnings per share
    
    $
    0.34
    
    
    $
    0.40
 Critical Accounting Policies
  Recent Accounting Pronouncements
   12




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Results of Operations
   
    
    Cost of services, which represents the costs associated with the production and delivery
of our products and services, consisting of compensation, including share-based
compensation, for research personnel, in-house faculty, and product advisors; the
organization and delivery of membership meetings, seminars, and other events; ongoing
product development costs; production of published materials, costs of developing and
supporting our membership web platform and digital delivery of products and services; and
associated support services.
 
    
    Member relations and marketing, which represents the costs of acquiring new members and
the costs of account management, consisting of compensation, including sales incentives and
share-based compensation; travel; recruiting and training of personnel; sales and marketing
materials; and associated support services, as well as the costs of maintaining our
customer relationship management software (CRM).
 
    
    General and administrative, which represents the costs associated with the corporate and
administrative functions, including human resources and recruiting, finance and accounting,
legal, management information systems, facilities management, business development and
other. Costs include compensation, including share-based compensation; third-party
consulting and compliance expenses; and associated support services.
 
    
    Depreciation and amortization, consisting of depreciation of our property and equipment,
including leasehold improvements, furniture, fixtures and equipment, capitalized software
and Web site development costs and the amortization of intangible assets.
 Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
 Revenues
  Costs and expenses
  
    
    Share-based compensation decreased $2.5 million in the three months ended March 31, 2010
compared to the same period in 2009. The decrease is primarily a result of a decrease in
the total fair value of new share-based awards granted mainly as a result of declines in
the trading price of our common stock and the number of awards granted compared to prior
years.
 
    
    Facilities expense decreased $2.8 million in the three months ended March 31, 2010
compared to the same period in 2009. The decrease is primarily due to subleases of a
portion of our headquarters, which began in the third quarter of 2009.
  13




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
    
    We also incurred additional expenses due to the strength of the British Pound compared
to the U.S. dollar in the three months ended March 31, 2010 versus the same period in 2009.
The value of the British Pound versus the U.S. dollar was approximately $0.13 higher on
average in the three months ended March 31, 2010 compared to the same period in 2009. Costs
incurred for foreign subsidiaries will fluctuate based upon changes in foreign currency
rates in addition to other operational factors. We enter into cash flow hedges for our UK
subsidiary to mitigate foreign currency risk, which offsets a portion of the impact foreign
currency fluctuations have on costs and expenses.
 Cost of services
  Member relations and marketing
  General and administrative
  Depreciation and amortization
  Restructuring costs
  Other (expense) income, net
    14




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Provision for income taxes
   Liquidity and Capital Resources
    Cash flows from operating activities
    Cash flows from investing activities
   15




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Cash flows from financing activities
  Commitments and contingencies
   Contractual obligations
  Off-Balance Sheet Arrangements
  Forward-looking statements
   16




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Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors.
   17




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Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchases of Equity Securities
 Total Number ofShares
    
    
    Approximate $Average
    
    
    Purchased as
    
    
    Value of SharesTotal
    
    
    Price
    
    
    Part of a
    
    
    That May Yet BeNumber of
    
    
    Paid Per
    
    
    Publicly
    
    
    PurchasedShares Purchased
    
    
    Share
    
    
    Announced Plan
    
    
    Under the PlansJanuary 1, 2010 to January 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,316,404February 1, 2010 to February 28, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,316,404March 1, 2010 to March 31, 2010 (1)
    
    
    6,807
    
    
    $
    26.83
    
    
    
    6,807
    
    
    $
    22,133,761Total
    
    
    6,807
    
    
    $
    26.83
    
    
    
    6,807
 
 (1)
    
    Amounts include the effect of employees using common stock received from the exercise of
share-based awards to satisfy the statutory minimum federal and state withholding requirements
generated from the exercise of such awards. In effect, the Company repurchased, at fair market
value, a portion of the common stock received by employees upon exercise of their awards.  
 Item 3.
    
    Defaults Upon Senior Securities.
  
 Item 4.
    
    (Removed and Reserved).
 
 Item 5.
    
    Other Information.
   18




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Item 6.
    
    Exhibits.
  Exhibit No.
    
    Description31.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule 13a  14(a) of the
Securities Exchange Act of 1934, as amended31.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule 13a  14(a) of the
Securities Exchange Act of 1934, as amended32.1
    
    
    Certifications pursuant to 18 U.S.C. Section 1350
  19




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SIGNATURES
  THE CORPORATE EXECUTIVE BOARD COMPANY
(Registrant)Date: May 10, 2010
    By:
    /s/ Richard S. LindahlRichard S. LindahlChief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)  20




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Exhibit Index
 Exhibit No.
    
    Description31.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule 13a  14(a) of the Securities
Exchange Act of 1934, as amended31.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule 13a  14(a) of the Securities
Exchange Act of 1934, as amended32.1
    
    
    Certifications pursuant to 18 U.S.C. Section 1350
  21